The US Treasury Department announced in 2020 that it was giving a US$700 million loan to the trucking company. Photo / Michael Nagle, The New York Times
A congressional report raises new questions about a pandemic relief loan to a troubled trucking company with close ties to the Trump administration.
Democratic lawmakers on Wednesday released a report alleging that top Trump administration officials awarded a US$700 million ($1.07 billion) pandemic relief loan to a struggling trucking company in 2020 over the objections of career officials at the Defence Department.
The report, released by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, describes the role of corporate lobbyists during the early months of the pandemic in helping to secure government funds as trillions of dollars of relief money were being pumped into the economy. It also suggests that senior officials such as Steven Mnuchin, the former Treasury secretary, and Mark Esper, the former defence secretary, intervened to ensure that the trucking company, Yellow Corp., received special treatment despite concerns about its eligibility to receive relief funds.
"Today's select subcommittee staff report reveals yet another example of the Trump administration disregarding their obligation to be responsible stewards of taxpayer dollars," Rep. James Clyburn, D-S.C., the chairman of the subcommittee, said in a statement. "Political appointees risked hundreds of millions of dollars in public funds against the recommendations of career DOD officials and in clear disregard of provisions of the CARES Act intended to protect national security and American taxpayers."
The US$2.2 trillion pandemic relief package Congress passed in 2020 included a US$17 billion pot of money set up by Congress and controlled by the Treasury Department to assist companies that were considered critical to national security. In July 2020, the Treasury Department announced it was giving a US$700 million loan to the trucking company YRC Worldwide, which has since changed its name to Yellow.
Lobbyists for Yellow had been in close touch with White House officials throughout the loan process and had discussed how the company employs Teamsters as its drivers, according to the report.
Mark Meadows, the White House chief of staff, was a "key actor" coordinating with Yellow's lobbyists, according to correspondences that the committee obtained. The report also noted that the White House's political operation was "almost giddy" in its effort to assist with the application.
The loan raised immediate questions from watchdog groups because of the company's close ties to the Trump administration and because it had faced years of financial and legal turmoil. The firm had lost more than US$100 million in 2019 and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. It recently agreed to pay US$6.85 million to resolve allegations "that they knowingly presented false claims to the US Department of Defence by systematically overcharging for freight carrier services and making false statements to hide their misconduct."
To qualify for a national security loan, a company needed certification by the Defence Department.
According to the report, defence officials had recommended against certification because of the accusations that the company had overcharged the government. They also noted that the work that the company had been doing for the federal government — which included shipping meal kits, protective equipment and other supplies to military bases — could be replaced by other trucking firms.
But the day after a defence official notified a Treasury official that the company would not be certified, one of Mnuchin's aides set up a telephone call between him and Esper.
The report indicated that Esper was not initially familiar with the status of Yellow's certification. Before the call, aides prepared a summary of the analysis and recommendations of the department's career officials that concluded that the certification should be rejected.
Before those reached Esper, Ellen M. Lord, the department's undersecretary for acquisition and sustainment who was appointed by Trump, intervened and requested a new set of talking points that argued that the company should receive the financial support "to both support force readiness and national economic security." Lord could not immediately be reached for comment.
After the call with Mnuchin, Esper certified that the company was critical to national security and a week later the approval of the loan was announced.
Mnuchin then sent an email to Meadows that included news reports praising the loan. He highlighted positive comments from James Hoffa, the longtime president of the Teamsters union, who according to documents in the report made a direct plea to President Donald Trump about the loan.
Esper and Mnuchin declined to comment.
A former Treasury official familiar with the process said the loan saved 25,000 union jobs during an economic crisis and prevented disruption to the national supply chain that the Defence Department, businesses and consumers had depended on. The former official said that because of the terms of the loan, taxpayers were profiting from the agreement.
A spokesperson for Esper said the company met the criteria to be eligible for the loan and emphasised that the report made clear that senior staff at the Defence Department recommended that he certify it. The Treasury Department made the final decision to issue the loan, the spokesperson added.
At a congressional oversight hearing before leaving office in late 2020, Mnuchin said the loan was appropriate and necessary for saving jobs and maintaining trucking services to the Defence Department. Lawmakers from both parties, such as Sen. Ron Wyden, D-Ore., and Pat Roberts, the Republican former senator from Kansas, had sent letters to Mnuchin urging him to consider the loan application.
Other lawmakers, however, have been deeply sceptical of the loan, which is the subject of an investigation by the Congressional Oversight Commission, a bipartisan panel that was set up to oversee portions of the relief money. Rep. French Hill, R-Ark., who sits on that commission, said the loan should not have been given.
"As I've previously said, the US$700 million taxpayer-backed loan Treasury made to Yellow, formerly YRC, was a mistake, and now the commission is focused on how we can prevent this from happening again," Hill said.
Yellow had many connections to the Trump administration. The company had financial backing from Apollo Global Management, a private equity firm with close ties to administration officials. Trump had selected the company's CEO, Darren Hawkins, to serve on a coronavirus economic task force. And he had nominated the company's former CEO, William Zollars, to the US Postal Service's board of governors.
The report accuses Yellow of misrepresenting its business to help secure the loan. It claimed to provide a larger share of trucking services to the Defence Department than the department assessed. Communications included in the report also showed a company executive discussing using funds to catch up on capital investments when the relief money was supposed to be used for offsetting losses from the pandemic. The executive said the company had its "hand in the cookie jar."
Along with the release of the report, Clyburn sent a letter to the Treasury Department's inspector general asking for an investigation into whether Yellow had violated the False Claims Act.
A law firm representing Yellow sent a letter to Clyburn before the release of the report defending the company's actions and describing many of the allegations as "baseless." The company stood by the trucking services data that it provided when applying for the loan and said that Yellow has paid more than US$25 million in interest on the loan. The letter also noted that company had settled its dispute with the government last month.
The letter, which was written by Marc E. Kasowitz, who was previously Trump's personal attorney, was provided to The New York Times by Heather Nauert, an adviser to Yellow who was previously a spokesperson for Mike Pompeo, Trump's secretary of state.
This article originally appeared in The New York Times.
Written by: Alan Rappeport
Photographs by: Michael Nagle
© 2022 THE NEW YORK TIMES
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